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Take a drive down Route 9, starting in the Framingham area heading west, and it may feel a little like déjà vu after a while.
There are two Stop & Shop supermarkets in Framingham, along with a Whole Foods, Trader Joe’s and a BJ’s Wholesale Club.
A few miles past the intersection with I-495, near Route 20 in Northborough, sits the first Wegmans in Massachusetts, a 140,000-square-foot grocery store. And within a couple of miles of that is a new 60,000-square-foot Price Chopper on Route 9 in Shrewsbury that opened last year. Farther up the road are another Stop & Shop and a Shaw’s.
Sprinkled across the area are a variety of Hannaford Supermarkets, Roche Bros., Market Baskets, and Trader Joe’s stores. The Worcester Wal-Mart Supercenter includes a grocery store and increasingly, pharmacy brands such as CVS are selling groceries.
All in all, there are dozens of places to buy groceries in the fairly condensed 10-mile radius around Route 9 in Central Massachusetts, and there are more to come.
Price Chopper, for instance, has broken ground for stores in Hopkinton and Gardner that it plans to open within the next two years and officials with Big Y will soon announce plans for a new store in Central or Eastern Massachusetts.
It begs the question: Is the region oversaturated with supermarkets?
Industry Perspective
“No,” said Mona Golub, a spokesperson for Price Chopper. “In terms of a competitive landscape, many areas we are in have a number of players, but we feel we have some distinctive strengths that allow us to succeed.”
Each chain prides itself on its own distinctive strategy and market niche. But grocery store analysts question whether they can all survive, especially given macro-economic conditions.
“My gut tells me not everyone can make it,” said Michael Berger, a senior editor of the Duxbury-based The Griffin Report, a trade magazine covering food retail along the East Coast. “And all these new stores could expedite the process by which some stores bow out.”
It’s a complicated environment for supermarket chains right now, said Andrew Harig, a director of government relations for the national Food Marketing Institute (FMI) in Arlington, Va., a nationwide trade group representing more than 1,600 grocery stores, suppliers and distributors.
Spikes in food prices in the last 18 months, combined with customers avoiding high-priced items, has caused the nationwide average of net profits after taxes for supermarket chains to drop below 1 percent of sales for the first time since 2003.
If there’s one glimmer of good news for grocery stores, it’s this: People are generally staying in more often to cook rather than dine out, Harig said. But, today’s shoppers are heavily driven by value — they want to buy good food at the lowest possible price.
In 2005, a survey of consumers by FMI found that high-quality meat and produce, a clean store and low prices, were the top factors, in that order, that consumers used to decide where to shop for their groceries. This year, low prices rose to the top of that list.
Value-driven consumers shop around for the best deal, Harig said. Whereas in the past customers were more likely to be loyal to one store or chain, today customers shop around for the best deals. And in a suburban area that has robust transportation infrastructure to support a traveling shopper — like Route 9 and I-495 — that could mean shoppers will go out of their way to hunt for the best deals.
Survival Of The Fittest
Perhaps the process of weeding out some chains has already begun.
Big Y, a Springfield-based family-owned, decades old supermarket chain, closed its store near Route 20 in Worcester last year, in part because of new competition sprouting up in the area.
A new Wal-Mart Supercenter opened just off of Route 146 in Worcester in the past two years. That’s in addition to the new Price Chopper that opened in Shrewsbury and the Wegmans that recently opened in Northborough.
Big Y spokesperson Claire D’Amour-Daley said a number of factors led to the company’s decision to close that Worcester store. The lease at the site was expiring, new competitors had opened stores and, increasingly, non-grocery stores have begun to sell groceries, such as CVS and Walgreens.
But Big Y is still committed to the area, D’Amour-Daley said. The company has plans to open a new store in Eastern or Central Massachusetts and she said many of the Worcester Big Y customers still shop at the company’s other store on Mayfield Street in the city.
So just how does a supermarket chain decide where new stores will open?
“Grocery stores look for mouths to feed,” D’Amour-Daley said. “It’s as simple as that.”
That means population trends are important statistics for chains to examine, she said. Other factors include the current competitive landscape and the number of potential sites where a supermarket could be built in the area.
“There’s a huge complicated formula that goes into site selection,” she said. “Then, when a site is selected, the financial numbers are taken into account.”
Hannaford, based in Scarborough, Maine, has 13 stores in Central Massachusetts. In 2004, it purchased the Victory Supermarkets chain, which had locations throughout the region.
As for the increased competition, Hannaford spokesperson Eric Blom welcomes it. “Competition makes everyone better,” he said.
Banking On Brand Recognition
Other stores are relying on their strong brands to make a market impact.
Wegman’s, for example, has been the recent talk of the town since it opened its first store in Massachusetts, in Northborough.
Some customers drove hundreds of miles for the debut, and some even camped out overnight just to be among the first to enter the store, said Bill Congdon, the company’s New England division head.
Berger, with the Griffin Report, said Wegmans certainly has caught headlines in recent weeks. But he said it’s too soon to tell exactly what the impact of the chain in the area is and will be.
“Give it a couple of months,” he said. “Two or three months from now let’s see how they’re doing and then we’ll have a much better idea.”
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